Tabell’s Market Letter – October 14, 1988

\ TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 967-2300 October 14, 1988 -.I t-is -inter-esting-how -muoh-last-week typified-the' past- marketyear. -Wehad-;-first. of-8l—-'- —l- Wednesday's 30-point decline which, like 80 many of the year's moves, was in anticipation of trade-deficit figures which were not to be published until Thursday morning. The actual release of numbers slightly worse than most expectations produced a modest Thursday recovery. (Better figures, as was the case with the unemployment release of a fortnight ago, would probably have resulted in a recovery of the entire loss.) The decline, of course, followed Monday's move to a new post-crash high in the Dow, a pesk which may have set records for unimpressiveness. A high was posted, to date at least, on only one day. it was the first new high since July, and it occurred on a day when both the Transportation and Utility Averages were down and more stocks declined than advanced. Yet this again was typical of the year's action. Next week will see the first anniversary of October 19, 1987. From that low to Monday's peak, the Dow is ahead some 24.17. However, the new highs made have been conspicuosly few and widely spaced. Two days after the crash, the DJIA had recovered from 1738.74 to 2027.85. That remained the best level attained until the string of three new peaks in early January, the last being at 2051.89. Next occurred four peaks in March, the last at 2087.37, which incidentally was accompanied by a breadth peak not achieved since. There followed three new highs in April, achieving 2110.08 on April 12th, four more in June and July, reaching 2158.61 on July 5th, and finally the new peak at 2158.96 this week. This makes for a total of only 17 days on which a new high has been scored out of 250 trading days through yesterday. In this halfhearted rise, breadth reached its peak on March 17, 143 trading days ago and has been diverging ever since. It cannot be emphasized too strongly how unusual this action is. To demonstrate this, it is necesSary, first of ill, to dispose of the notion that it ill constitutes a rilly within an ongoing bear market. This can be done fairly easily. We have pointed out many times that history strongly suggests that the bear-market is a largely mythical beast. The longest such rilly has been anywhere near a8 long 8S a year. If the year is not a bear market, it is something else, but, analyzed in buH market terms it looks strange indeed. The following table includes every major market low since 1942 and shows the highest point the Dow had reached in its first year and the percentage advance scored to that point. The final figure in the table is the number of days during that first year when a new peak was achieved. Bull Market Start Highest Point in 1st Year No. of Date DJIA Date DJIA Advance New Highs 4/28/42 98.95 4/6/43 136.93 38.38 67 10/9/46 163.12 7/24/47 186.85 14.55 21 6/13/49 161.60 6/12/50 228.38 41.32 89 9/14/53 225.49 9/14/54 351.78 56.01 92 10/22/57 419.79 10/17/58 546.38 30.16 53 6/26/62 535.76 5/31/63 726.96 35.69 58 10/7/66 744.32 9/25/67 943.08 26.70 46 5/26/70 631.16 4/28/71 950.82 50.65 63 12/6/74 577.60 7/15/75 881.81 52.67 48 2/28/78 742.12 9/8/78 907.74 22.32 32 8/12/82 776.92 6/16/83 1248.30 60.67 46 7/24/84 1086.57 7/19/85 1359.54 25.12 32 10/19/87 1738.74 10/10/88 2158.96 24.17 17 Contrasted with its predecessors, the present advance looks pretty anemic. It involves the smillest number of new highs on record and the third smillest percentage advance. It is also One of three advances in which a breadth divergence materialized in the first year, the other two being 1946 and-1966;- Wh.j! recentactlon'most resembles;-of course, is that following the low of 1946 or possibly of February, 1978. In both of these cases, the advances were small, and new highs Were widely spaced. What the two periods had in common was that they both constituted, reilly, not bull markets but base formations leading up to a later advance. 1946-1949, of course, constituted a trading range with a 20 percent range between high and low. The last year has been, in many ways, a carbon copy of that range which, it must be remembered. lasted for two years and nine months. 1978 eventuilly produced a modest bull market with an overall 38 advance, but not until its initial low was tested two years later on Silver Thursday. The week's new high certainly does not alter our conclusion that we are somewhere in a 1987-198 period of base formation. ANTHONY W. TAB ELL DELAFIELD, HARVEY. TAB ELL INC. Dow Jones Industrials (1200) 2140.11 S & P 500 (1200) 276.65 Cumulative Index 00/13/88) 3933.09 AWTlt No statement or expression of opInion or any other matter herein contained 15, or IS to be deemed to be, dlreC1ly or Indirectly, an offer or the solicrtallon of an offer to buy or sell any secunty referred to or mentioned The matter IS presented merely for the convenience of the subSCriber While we beheve the sources of our Information to be rehable, we In no way represent or guarantee the accuracy thereof nor of the statements made herein Any action to be taken by the subscnber should be based on hiS own Inves\tgatlOn and InformatIOn Delafield, Harvey, Tabellinc ,as a corporation and Its offICers or employees, may now have, or may later take, poSitions or trades In respect 10 any securriles mentioned In thiS or any future Issue, and such posllton may be different from any views now or hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabell Inc , which IS registered With the SEC as an Investment adVIsor, may gIVe adVIce to Its lvestmenl adVISOry and other customers mdependentiy of any statements made In Ihls or m any other Issue Further mlormal!On on any secu1J1y mentioned herein IS available On request